"Unfortunately so much commentary is self-serving or sensationalist. Pete Wargent shines through with his clear, sober & dispassionate analysis of the housing market, which is so valuable. Pete drills into the facts & unlocks the details that others gloss over in their rush to get a headline. On housing Pete is a must read, must follow - he is one of the finest property analysts in Australia" - Stephen Koukoulas, MD of Market Economics, former Senior Economics Adviser to Prime Minister Gillard.

"Pete Wargent is one of Australia's brightest financial minds - a must-follow for articulate, accurate & in-depth analysis." - David Scutt, Business Insider, leading Australian market analyst.

"I've been investing for over 40 years & read nearly every investment book ever written yet I still learned new concepts in his books. Pete Wargent is one of Australia's finest young financial commentators." - Michael Yardney, Australia's leading property expert, Amazon #1 best-selling author.

"The most knowledgeable person on Aussie real estate markets - Pete's work is great, loads of good data and charts, the most comprehensive analyst I follow in Australia. If you follow Australia, follow Pete Wargent" - Jonathan Tepper, Variant Perception, Global Macroeconomic Research, and author of the New York Times bestsellers 'End Game' and 'Code Red'.

"The level of detail in Pete's work is superlative across all of Australia's housing markets" - Grant Williams, co-founder RealVision, author of Things That Make You Go Hmmm...one of the world's most popular & widely-read financial publications.

Thursday, 25 May 2017

Clear evidence of financial stress rising

Stress on the rise

The latest regional quarterly figures from the Australian Financial Security Authority (ASFA) provided the most compelling evidence yet of rising financial stress levels.

Although the number of Part IV and Part XI bankruptcies was higher in the March quarter than in the preceding three months to December, year on year there was a modest decline.

Western Australia has seen a clear uptrend since the June quarter of 2014 as the resources downturn continues to bite.

Looking at new personal insolvency activity, however, there was a clear rise in the number of debtors both on a quarterly and on an annual basis.

Here too the figures for Western Australia reveal clear signs of financial stress, but in fact there was a strong increase in the number of debtors right across the board in the first quarter of the calendar year.Below the figures for personal insolvencies are smoothed on a rolling annual basis to strip out seasonality.

Sydney stress emergesThe number of debtors entering personal insolvency in Greater Sydney increased by a non-trivial 11 per cent in the March quarter.Drilling into the statistical areas it is clear that many of Sydney's lower socio-demographic suburbs and LGAs are driving the increase, with elevated levels of activity in Penrith, Campbelltown, Bankstown, and Blacktown, and a secondary tier of stress emerging in Fairfield and Liverpool.

There is also a growing heat spot of financial stress focused on the Central Coast, with rising debtor activity reported in Gosford and Wyong. As explicitly predicted in our Long & Short Reports, the region with the highest proportion of new debtors in the adult population was St Marys, for the apparent reasons explained in the report.

Across regional New South Wales, there was also a small flash of debtor activity in Newcastle during the March 2017 quarter, which will warrant careful monitoring.

Stress on the urban fringe

Similarly in Queensland the greatest contributor to the rising number of personal insolvencies was the outer urban region of Ipswich, including Springfield, while there was also a higher number of new debtors reported in the Logan region, where unemployment rates are elevated.Scanning out across regional Queensland the regions with the highest number of new debtors in the March quarter included Townsville and Rockhampton. Meanwhile in Greater Melbourne the greatest number of insolvencies was also seen in outer suburban hubs such as Wyndham, Whittlesea-Wallan, and Frankston. With both full time employment growth and wages growth so weak, the rise in the number of insolvencies looks set to continue.

It should be noted that with Australia's population swelling by well over 1 million people every three years or so, it is more or less assured that the absolute number of personal insolvencies will rise over time.

Adjusting the number of personal insolvencies for the size of the incumbent population and we can expect to see Queensland and Western Australia rising to the top of the pile, being the states most comprehensively impacted by the winding down of resources construction (and in Queensland's case, severe flooding).

Note that there is a series break in activity in the Australian Capital Territory (ACT), since before 2005 personal insolvencies were reported by state of lodgement rather than state of residence.

The wrap

Overall, the ASFA figures provide compelling evidence of a rising trend in the number of people in financial difficulty.

The regions showing the greatest levels of financial stress fit closely with what has been previously highlighted in our detailed market reports.

In the absence of further monetary policy easing, a further rise in insolvencies appears inevitable.